Source: E-mail dt. 16.08.2012
An
Analytical Study on E- Banking in India
Associate Professor, Department of Commerce, Periyar
University, Salem - 636 011
and
Mr. C. Sankar
Ph.D., Research Scholar, Department of Commerce,
Periyar University, Salem - 636 011
Abstract
In the 1990s, the banking sector in
India saw greater emphasis being placed on technology and innovation. Banks
began to use technology to provide better quality of services at greater speed.
The Internet Banking is becoming one of the fastest growing technologies that
is playing a significant role in the daily lives of human beings. Internet
Banking and Mobile Banking made it convenient for customers to do their banking
from geographically diverse places. Banks also sharpened their focus on rural markets
and introduced a variety of services geared to the special needs of their rural
customers. The Internet is slowly gaining popularity in India. The Internet Banking is changing the banking
industry and is having the major effects on banking relationships. Internet
Banking involves delivery of banking products and services. At present many of
the banks around the world have web presence in form of ATMs, Internet Banking,
Support services etc. In the world of banking, the development in information technology
has an enormous effect on development of more flexible payment methods and
more- user friendly banking services. Electronic Banking services are new and
the development and diffusion of these technologies by financial institutions
is expected to result in more efficient banking system.
Key words: Internet Banking, Support
services, technology, innovation.
1.1 Introduction
Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980.
Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
1.2 Definition of E-Banking
E-Banking is defined as the automated
delivery of new and traditional banking products and services directly to
customers through electronic, interactive communication channels, E-banking
includes the systems that enable
financial institution customers,
individuals of businesses, to access accounts, transact business, or obtain
information on financial products and services through a public or private
network, including the Internet. Customers access e-banking services using an
intelligent electronic device, such as a personal computer, personal digital
assistant, automated teller machine, Touch tone telephone. While the risks and
controls are similar for the various e-banking access channels, this booklet
focuses specifically on Internet-based services.
1.3 Salient
Features of Internet Banking
The salient features of Internet
Banking in India enlisted below
Ø Easily adoptable
by customers.
Ø Easy to deploy
and maintains.
Ø Cost effective
solution.
Ø Enables the bank
to reach its customers on the net.
Ø Reduce rush at
the counters of the bank.
Ø Enables the
customers of the bank to access information from anywhere and at any time.
Ø Balance and
transaction history search.
Ø Transaction
history export.
Ø Order new
statements.
Ø Mobile banking.
Ø Transfers.
Ø Pay bills with
BPAY
Ø Receive bills
online with BPAY view
Ø Pay anyone
payments.
Ø Multi payments
Ø SMS banking
services
1.4
Objectives of Study
The overall objective of the present study is to analysis the role of reach of Internet banking in India. The specific objectives of the study are enunciated below.
Ø To examine the reach of internet banking
Ø To analyze awareness among customers using internet banking
Ø To identity the level of security among customers in using these services
Ø To find out the popularity of the internet banking service in customers as users and non users along with reasons.
1.5 Functions of Internet Banking
The following are the main
function of internet banking in India
Ø Issue Demand
Drafts online
Ø Transfer funds
to own and third party accounts
Ø Credit
beneficiary accounts using the VISA Money Transfer, RTGS/NEFT feature
Ø Generate account
statements
Ø Setup Standing
Instructions
Ø Configure
profile settings
Ø Use e Tax for
online tax payment
Ø Use e Pay for
automatic bill payments
Ø Interface with
merchants for railway and airline reservations
Ø Avail DEMAT and
IPO services
1.6 Internet Banking in India
Ø The Reserve Bank
of India constituted a working group on Internet Banking. The group divided the
internet banking products in India into 3 types based on the levels.
Ø Information Only System: General
purpose information like interest rates, branch location, bank products and
their features, loan and deposit calculations are provided in the banks
website. There exist facilities for downloading various types of application
forms. The communication is normally done through e-mail. There is no
interaction between the customer and bank's application system. No
identification of the customer is done. In this system, there is no possibility
of any unauthorized person getting into production systems of the bank through
internet.
Ø Electronic Information Transfer System: The
system provides customer- specific information in the form of account balances,
transaction details, and statement of accounts. The information is still
largely of the 'read only' format. Identification and authentication of
the customer is through password. The information is fetched from the bank's
application system either in batch mode or off-line. The application systems
cannot directly access through the internet.
Ø Fully Electronic Transactional System: This system
allows bi-directional capabilities. Transactions can be submitted by the
customer for online update. This system requires high degree of security and
control. In this environment, web server and application systems are linked
over secure infrastructure. It comprises technology covering
computerization, networking and security, inter-bank payment gateway and legal
infrastructure.
1.7 Highest Internet User Countries in the World
India is the fourth largest internet
user countries in the world. The reach of internet banking has also increased
in India due to the internet usage increase.
1.8 Use of
Internet Banking in India for last few Years
Year
|
2003 |
2004 |
2005 |
2006 |
2007 |
2008 |
2009 |
2010 |
Increase
% |
9 |
12 |
15 |
20 |
25 |
32 |
40 |
50 |
The number of internet banking users has
increased from 9% in 2003 to 50% in 2010 due to increase in internet services.
Multiple services can be offered through online banking such as – bill payment
services, Fund transfer, railway ticket booking etc.
Internet banking is changing the banking industry and is having the major effects on banking relationships. The net banking thus, "now is more of a norm rather than an exception in many developed countries" due to the fact that it is the economical way of providing banking services. Banking is now no longer confined to the traditional brick and mortar branches, where one has to be at the branch in person, to withdraw cash or deposit a cheque or request a statement of accounts. There is need to scan and analyze the market and respond to the needs of customers and to generate awareness regarding advantages of internet banking.
1.9 SWOT Analysis of Internet Banking
The following are the strength, Weakness
opportunists and threats of Internet Banking in India
1.9.1 Strengths
Ø Aggression
towards development of the existing standards of banks
Ø Strong
regulatory impact by central bank to all the banks
Ø Presence of
intellectual capital to face the change in implementation with good quality
Ø Fully
computerized and techno savvy
Ø A person can
access his account from anywhere he is
Ø A person can do
banking transactions like funds transfer to any account, book ticket, bill pay
at any time of the day
1.9.2 Weaknesses
Ø High bank
service charges. All the bank charges highly to the customers for the services
provided through internet banking
Ø Poor technology
infrastructure
Ø Ineffective risk
measures
Ø Easy Access of
internet banking account by wrong people through email ids
Ø When the server
is down the whole process is handicapped
1.9.3
Opportunities
Ø Increasing risk
management expertise
Ø Advancement of
technologies, strong asset base would help in bigger growth
Ø Safety of using
internet banking is robust, so more internet banking users in future
Ø The
international scope of internet banking provides new growth perspectives and
internet business is a catalyst for new technologies and new business processes
1.9.4 Threats
Ø Banks provides
all services through electronic computerized machines and this creates problems
to the less educated people
Ø Inability to meet
the additional capital requirements
Ø Huge investment
in technologies
Ø Internet banking
will be replaced by mobile banking
1.9.5 Inference
of SWOT Analysis
With the growth of internet at a rapid
pace and the people’s time constraints, internet banking is used widely used
for all the banking transaction purpose all over the world. Banking working
hours is not limited to internet banking as the banking account can be accessed
throughout the day.
1.10 Advantages
The
advantages of internet banking are listed below.
Ø Eliminates the
use of paper and replaces it with computer screens.
Ø No need to stand
in line at the bank, because all you have to do is log on to the internet
access your account.
Ø It is safe,
hassle free, saves hours of time a month.
Ø Greater reach to
customers.
Ø Quicker time to
market.
Ø Ability to
introduce new products and services quickly and successfully.
Ø Ability to
understand its customer needs.
Ø Customers are
given access to information easily across any location.
Ø Greater customer
loyalty.
Ø It is
convenient.
Ø There are no
geographical barriers.
Ø Getting
quarterly statements from the bank, transferring funds to outstation.
Ø Services can be
offered at a miniscule cost.
1.11 Why
Consumers are not Using Internet Banking
These are the
following reason why consumers are not using internet banking in India.
Ø Risk
Ø No perceived
need
Ø Lack of
knowledge about the service
Ø Inaccessibility
Ø Lacking the
human touch
Ø Pricing concerns
Ø IT fatigue
Ø Inertia
Ø Managerial
implications
Ø
1.12
Difficulties
These
are all the following difficulties in Internet Banking in India
Ø The RBI does not
still allow inter-bank funds transfer through the net since the Cyber laws are
still not in place. Once allowed, this could pave the way for smooth cash
management.
Ø Security also
continues to remain a major issues especially in the case of corporate, as bulk
transactions are done in a day.
Ø Bankers are
aware of the fact reliable transaction technology as well as management of the
security perceptions of customers are the keys to success.
Ø The infrastructural
costs of providing such services are quite high.
Ø Limited criteria
in online trading.
Ø Delay in fund
transfer.
Ø When server
downs the whole process handicapped.
Ø Technical
problems occur sometimes which affect customers badly.
Ø Late processing
also sometimes in some services create a hurdle causing delay.
Ø Late security
level in the service to cope with hacking problem.
1.13 Findings
The
main findings of the study are presented herewith.
Ø In the users
ratio of internet banking 65% of customers are using this service.
Ø More banks are
connecting to the any software company to running the E-banking service. In
these services the SBI banks is top in service of E-banking.
Ø The services
that are mostly used by maximum customers are transactions, online trading,
bill payment, shopping etc.
Ø The mode of the
cash deposit in bank is for use to online transaction cash, cheque &
e-banking.
Ø Different banks
different charge on online service.
Ø Although there
is some feeling of insecurity also but still due to the multi-features service
and business class prefer it.
1.14 Suggestions
The
following are the suggestions for the further improvement of Internet Banking
in India
Ø To prevent
online banking from remaining customers to prompt this service through
advertising company.
Ø After repairing
this basic deficiency, banks must ensure that their service is competitive.
Ø Bank should
provide the services in different languages.
Ø All the
complaints felt by the customers should be considered with seriousness and
solution based approach to keep them satisfied in long run,
Ø The bank should
extend their tie-up contracts with other various institutions whether financial
or non-financial for convenience of its customers.
Ø Bank should
extend the technology which is used in internet banking in order to remove the
difficulties.
1.15 Conclusion
Internet banking has become a necessary
survival weapon and is fundamentally changing the banking industry worldwide.
Today, the click of the mouse offers customers banking services at a much lower
cost and also empowers them with unprecedented freedom in choosing vendors for
their financial service needs. The rise of Internet banking is redefining
business relationship with the customers. The International scope of Internet
banking provides new growth perspectives and Internet business is a catalyst
for new technologies and new business processes. The reach of Internet banking
has rapidly increased due to the Telecommunication Infrastructure development
in India.
References and Notes
1. Data Protection in Consumer E-banking Journal of Internet Banking and Commerce, April 2006, vol.11,no.1 (http://www.arraydev.com/commerce/jibc/)
2. Adoption of Internet Banking: An Empirical Investigation of Indian Banking Sector by Balwinder Singh, Reader, Department of Commerce and Business Management, Guru Nanak Dev University, Amritsar, India.
3. A Study of
Net Banking provided by HDFC Bank, www.scribd.com/.../a-study-of-
netbanking-provided-by-hdfc-bankhttp://www.hdfcbank.com/
4. ICICI Bank Consumer Banking in India, www.icicibank.com
5. Project on SWOT analysis of ICICI Bank, www.scribd.com/doc/13163460/Swot-of- ICICI-Bank
6. Services
provided by the bank through “E-Banking in India” by Abhinav Tawani,
www.scribd.com/doc/25049932/Final-Project-on-E-banking
7. Internet Banking Comptroller’s Handbook October 1999
8. Internet Banking in India part – I by Dr. A.K. Mishra, www.banknetindia.com
9. Why consumers are not using Internet Banking : a qualitative study by Philip Gerrard Nanyang Business School – Singapore, www.emeraldinsight.com/0887-6045.htm
10.Towards online banking by Soutiman Das Gupta, Soutimand@networkmagazineindia.com
11.Internet users – Top 20 countries – internet usage, www.internetworldstats.com/top20 htm
12.
The Indian internet banking journey, www.icmrindia.org